What does the term "dual agency" refer to in real estate?

The term "dual agency" in real estate refers specifically to a situation where a broker represents both the buyer and the seller in the same transaction. This arrangement can create complexities, as the broker must balance the interests of both parties while ensuring that each receives fair treatment. It is critical to manage this dual representation carefully to avoid conflicts of interest, and agents usually need to disclose this relationship to both parties to ensure transparency and maintain ethical standards.

The other options do not accurately reflect the definition of dual agency. One option suggests that a broker can only represent one party, which contradicts the concept of dual representation. Another option implies that dual agency necessitates separate representation for the buyer and seller, which counters the essence of dual agency itself. Lastly, a description of a scenario where the buyer and seller work independently does not convey the nature of dual agency, as it is inherently about the broker's role in representing both parties simultaneously. Understanding dual agency is vital for recognizing its implications and responsibilities within real estate transactions.